Guaranteed Auto Loans Bad Credit and No Money Down
If you have poor credit and not a lot of savings, that can put you in a tough spot if you need to purchase an automobile. You may have a challenging time getting approved for a loan compared to a borrower with good credit and the ability to make a down payment on a car.
But that does not mean you are out of luck. Online, you can search for car loans with no money down and poor credit. A good place to start is in our comparison chart below. You can also scroll down to read more about shopping for an auto loan with bad credit and zero down payment.
Best Guaranteed Auto Loans Bad Credit and No Money Down
Why Do Lenders Want to See a High Credit Score?
When you are comparing auto loan offers, it is important to understand the lender’s point of view when evaluating you as a potential borrower. The lender needs to assess your risk in order to decide whether to offer you a loan. As your credit score summarizes your risk profile in a simple numerical format, this is the first thing that most lenders will consider.
If you have a high credit score, lenders know that you have a history of follow-through with your payments. But if you have a low credit score, offering you a loan may be risky as you have defaulted on payments in the past.
Why Do Lenders Ask for a Down Payment?
Lenders are most likely to ask for a down payment in a situation where your credit score is not ideal. This is their way of attempting to offset some of the risk you present. While down payment requirements can vary, 10% is common for an auto loan.
If you are shopping for a used vehicle, this may not always be unmanageable. Imagine for example that you are purchasing a vehicle worth $6,000. If you need to put 10% down, that is $600. While that might be difficult to manage, in the grand scheme of things, it may be feasible.
Are There Zero Down Guaranteed Bad Credit Auto Loans?
What if you absolutely cannot afford a down payment but still do not have ideal credit? While searching for solutions, you may have seen advertisements for “guaranteed auto loans for bad credit with no money down.” Do bad credit auto loans with guaranteed approval exist?
Bad credit and no credit auto loans do exist—and in some case, you may even find unsecured bad credit auto loans with no down payment. There are even pre-approved subprime/bad credit auto loans. But no lender can honestly and responsibly guarantee loan approval. In fact, you should never work with a lender that does not check to make sure you can afford a vehicle loan before offering you one. You cannot trust such a lender to have your best interests at heart.
Instead, choose a lender which will run a “soft” alternative credit check which will not damage your score. A reputable lender will also look at your income to make a determination as to whether to offer you a car loan.
Options for Financing a Vehicle Purchase With Bad Credit
There are a number of ways you can potentially approach financing a vehicle with bad credit and minimal savings. Here are some possibilities:
- Save up for a down payment. If you do not need to purchase the automobile right away, see if you can save up some money for a 10% down payment on an inexpensive used vehicle.
- Take out a loan for a down payment. Another idea is to take out an additional personal loan to cover the cost of the down payment for the vehicle. While this will cost you more in interest over time, it will at least make it possible to purchase the vehicle. This could be financially sensible if it makes the difference, say, in being able to get to work or not each day. Don’t forget you can also ask friends or family to loan you the money if you have people in your life who are willing to lend a financial hand.
- Raise your credit score. You can try to raise your credit score before you apply for a loan. This would make it much easier to get around making a down payment. Don’t have a lot of time before you need to buy the vehicle? It is still worth seeing if it is possible to raise your score (see suggestions in the section below), as sometimes it is possible to do so rapidly.
- Get someone to co-sign on your loan. A family member or friend with a higher credit score can potentially co-sign on your loan, helping reduce your down payment requirement while improving rates and terms.
- Secure your loan. Tying your auto loan to collateral may be sufficient to offset the risk associated with your low credit score. This may eliminate the down payment requirement.
- Work with a lender that specializes in helping borrowers with poor credit or no credit. These lenders can sometimes offer loans which include zero down payment. They typically carry higher interest rates, but they may be unsecured. You will find the largest selection of these types of lenders online. You also can easily check on the reputations of the lenders online and read reviews from customers.
Which of these options is best? That depends on your situation and specific needs. For some customers, a lower interest rate may be most important. But for others, avoiding a down payment may be essential. Evaluate your own needs to figure out what is most suitable for your scenario.
Quick Tips to Boost Your Credit Score Before You Apply for an Auto Loan
If you do want to try and raise your credit score before applying for a zero down payment auto loan, here are some quick tips and tricks:
- Join programs like Experian Boost to get your utilities reported to the credit bureaus. For customers who are timely with these payments, an immediate jump in score is possible.
- If you have outstanding debts you can pay off right now, doing so can increase your score.
- Temporarily reducing your credit utilization can increase your credit score.
- Have someone you trust add you to their credit account as an authorized user. Their good habits should reflect well on you.
- Order one of your free annual credit reports form any of the three major bureaus: Experian, Equifax or TransUnion. Check over it carefully. See any entries which don’t appear to be correct and might be harming your score? You can contest those directly with the bureaus as well as with the creditors who reported them.
- One-time lapses are sometimes forgiven by creditors you are on good terms with. If you ask politely, they may be willing to wipe them from the record.
Find Guaranteed Auto Loans with Bad Credit and No Money Down
Are you ready to apply for a bad credit loan with no down payment and no collateral? Scroll back up to our table of recommendations. These are all lenders we have carefully vetted and trust to offer transparent, responsible, safe and affordable loans to customers with poor credit or no credit. You could be driving your new vehicle sooner than you think.